Thursday, May 31, 2012

Teaming is quite common in business. Companies find themselves competing on some programs and teaming on others.

Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming.

Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other's contributions in pursuing large-scale projects.

Relationships must be developed with primes and other small businesses that can help you, team with you and keep you in mind as they search for success. That takes time, patience and open-minded, out of the box thinking.

It also takes more than a Non-Disclosure Agreement (NDA), a teaming agreement (TA) and a proposal to succeed. It takes dynamic marketing and communication with strong partners and hard, innovative work. Nice buzz words you say - but it is the truth and you have to find what that truth means to you.

See the below free articles on how to develop teaming relationships, protect your interests and your intellectual property.

Tuesday, May 29, 2012

After much
sweat, hard work and some luck – you have achieved business success. Sales,
profits and cashflow are growing. You have plowed everything you own into the
business to support new hiring, additional equipment and carry more inventory
and receivables.

Now
growth is becoming more manageable, cash is accumulating after all critical funding
needs have been met. What is the next step? Invest even more funds into the business
or invest some outside the business for your retirement? Should you continue to
concentrate your personal net worth in the business or should you begin to
spread it out?

I share
my experience from 25 years back. I started a printing business in the early
80’s, struggled to build the business, achieved sales and profit success, and
faced the same question – concentrate or spread out my nest eggs?

In the
quick printing industry publication, there was an article that addressed this
issue. I recalled that it used a dentist as a case study – he invested all his
profits in additional equipment for his practice. Nothing was invested outside
his business, he reasoned "I'm going to invest everything in my dental practice. Patient
numbers are growing, revenues and profits are growing. Everybody needs dental
care.” Unfortunately, his office’s demographics changed for the worse and his
equipment became obsolete – he was unable to obtain full value for his investment. All his nest eggs were in the practice.

After
reading the article, I thought it made a lot sense. I decided to spread out my
family’s nest eggs – note this decision’s potential impact on your family. I
invested in stocks and bonds, income real estate in addition to our house.
Fortunately, this worked out well because computer technology did eventually hurt
the printing business.

After
your business’s critical funding needs are met, I believe it is a good practice
to spread out your family’s nest eggs. It will lead to more confidence and
peace of mind because you will have more alternatives.

Monday, May 28, 2012

Lowering your SP is perhaps one way out of the economic crisis but more important is reinventing yourself - your company, your product, your areas of operations ... as people across the globe are equally looking forward to increase business including China and India.

5.Turning your cost centers into profit centers - e.g. if you have excess production capacities or R&D capacities or test beds ..... you can take up such opportunities from across the world from different companies.

6. Collaborate in countries where your products or services are not

7. Increase your sales network - in your country and abroad.

Affordability in my mind is in availability of funds.

Some long range thinking is in order here, not short term bottom line thinking. Most of the big boys and many, many of the small ones are acutely aware of this factor or will become acutely aware when their funding goes dry.

In past periods I have witnessed this type over the last 40 years, those companies that diversify (innovate and keep a long view of requirements) as well as team and develop a marketing approach that is hard hitting in the areas of "Bang for the Buck" (efficiency, talent utilization and resource management) survive.

Those that send a bill for everything they want paid and show up with an army of workers with a cost plus mentality, burn through and run out of funding, lose competitions on overhead and G&A issues and go out of business.

The little guy with the "Big Guy" talent has an advantage but must cover his back as the larger corporations become squeezed and go for the smaller pieces of the action.

Saturday, May 26, 2012

You will hear a lot of pros and cons concerning spending the time to create a full business plan. Many will say it is not necessary to do all of the research and create all of the tables etc. Others will tell you that it is necessary, especially, if you intend to apply for a loan or grant to support your small business. The truth is you should do everything and then all you need do is update the tables and verbiage to correspond with requirements for applying for a loan or grant. Yes, creating a Business Plan does involve some work, if this bothers you…don’t give up your day job!

What I found was the creation of the business plan made me think about many necessities that would lead us to be successful in our niche that I had not recognized before. It, also, made me think of things purely related to doing business in general I had not thought of. Your business plan provides you with tools to track your progress from day one, month by month and year to year. If you think how much money you will make is all you need to track, you’re wrong and I sincerely hope you realize this before the bills start coming in.

If you are just starting to think of launching a small business, start your business plan now, especially if this is your first venture. It will take a few weeks to complete and it is worth it. If you are not willing to put forth this effort, you are not going to succeed with your business…period! There is a lot of research required that establishes what your particular market segment is doing, who your competitors will be, what your competitors charge and where your competitors are located. Taking a close look at who my competitors were allowed me to realize a number of services I could and should offer to remain competitive and increase sales. The research, also, helped me set what to charge for these services to be competitive without appearing to be just “cheap.” If your competitors have been around for awhile, they have realized how much to charge for their services or products to not just stay in business, but to make a profit. I do hope you intend to make a profit.

Your business plan establishes your model, identifies your market sector, establishes your sales expectations, tracks your results in sales versus profits, and establishes your expenditures and income requirements to pay those expenditures and to make a profit. The most important benefit is that it does make you think. This is why you should make your business plan prior to launching your business, if you can be honest with yourself while preparing it you may find your business is not viable or you may need to expand your services or products to achieve the goals you set for near and long term success. Of course, the key is being able to be honest with yourself and keep your expectations within realistic limits. You want to do better than or very close to your projections, not a whole lot worse. If you’re thinking, “this guy is crazy, how is it possible to project how much I will make?” then you should either not go into business or keep voting that same straight Democrat ticket this November and hope for a bailout! The rest of us will applaud you for the first choice and I for one will not support you for the latter.

A business plan is another one of those things you can pay to have done for you, but I suggest you do it yourself. Only you can be truly honest about your expectations and goals. However, an outsider can be brutally honest about your market sector and the chances for success without being influenced by “pie in the sky.” Unless you can be completely honest about your chances for success and failure you will not last and or be able to grow your business.

There are a number of business plan templates available for sale and for free. The ones for sale do some of the work for you, but you may find them difficult to change to meet your needs. If you are going to apply for a loan or grant you should make the business plan as much yours as possible. A plan that appears to be a straight template does not carry as much weight as one appearing to be tailored to your business. You need to remember you are selling yourself and your company to obtain the loan or grant. You may have to participate in an interview as part of the process and if you are not familiar with the document you have produced it may be construed you are not sincere in putting forth the effort and therefore not a good risk. Microsoft Office WORD contains a good template for creating a business plan. The template is easily customizable and contains enough direction as to setting it up and what it should contain. The tables you will need to flesh out the business plan can be found in WORD or EXCEL templates, and just remember to customize them for a professional appearance. As with any company document, you should have someone proof the completed business plan. This should be someone you trust to do a good job and who is not afraid to offer suggestions and or corrections to you. You should, also, repay them with a good lunch or dinner as this is no quick read.

Once completed, remember to keep your “friend” handy and update the tables regularly so you can track how your business is doing and how well you projected your progress would be. All of this can and should be a fun and rewarding experience!

Thursday, May 24, 2012

Of course, there are people who say that, but when it comes to actually defining the true definition of love.....we find that what the people really mean is that they "like" it.

The relativity is that often, as you know, we use words and phrases out of context without truly considering their true significance. Let's take for instance the questions: " How do you pamper 'n' spoil your customers? How do you make them feel special and unique?"

Do you notice something, here? Neither one of these questions are unique. In fact, they reflect an "old school mentality" for what is understood today in a much better light as "customer care." Back then, It was all about manipulation.

Words like "pamper," "spoil," and phrases like "make them feel" presupposes an air of subliminal seduction as opposed to honesty.

Although there's more detail to really explaining what I'm saying, hopefully, it'll suffice to mention that we're, in general, a far cry from the school of "Roger Ramjet"

We don't "pamper 'n' spoil." Instead, we "gently embrace." We don't "make them feel special and unique." We let them "know" they are.

So, in direct response to " I recently got a new set of clients, and I want to do something special for them."

Here's your answer:

Gently embrace them with sincere words of appreciation, letting them know that they're truly very special and unique....'cause really...they are!! Then you graciously prove it by doing something extra relative to the situation.

Wednesday, May 23, 2012

I joined my Dad with his company, AC Forms as a sales rep in 1974. We were a force of two. My Mom was the part time administrative support person and the mother of six. I was the future. It was a shaky start. My job was to get new business. I used the phone to solicit appointments. I can remember my voice quaked and my message was ill-prepared. After exhausting all legitimate leads I was proffered, by phone, I hit the road.

My first cold call, “cold “ being the vernacular used for an unsolicited visit on an unsuspecting business to make a sales pitch.

I was one of the major contributors as to why there are so many “No Solicitors” sign on doors.

Like the polyester plaid I was wearing, rejection isn’t my strong suit. I have to admit there were days I could not face the day ahead without becoming physically ill, cramps and vomiting, anticipating the rejection that inevitably lay ahead.
For better or worse, most of the businesses I “solicited” on the south side of Chicago, were unaccustomed to a 21 year old young man in polyester and a “pleather” briefcase showing up at their door. My first “sales call” and I use the term loosely, required considerable surveillance. I drove around the block several times. In the end, it was a relief to just to be dismissed. To hear a simple “no thanks” was a victory, of sort. I had broken the sound barrier. I had made contact with the other side. Soon, I was making 20 cold calls in a day.

Thankfully gas was 30 cents a gallon! My father would get a call from someone I had visited and he would say, “Yes, that’s my son, he’s like manure, he’s spread all over the place.” The message was loud and clear, I needed to take the next step, get to the next level.

Speaking of manure, here's a great joke from Ronald Reagan, only takes a minute, during one of his speeches. Precious really. Good clean fun!

I needed to convince my prospects I wasn’t just another pretty face in plaid polyester. My contacts were bewildered, annoyed, amused, indifferent or thankfully, on rare occasion, sympathetic to my pitch. It’s simply amazing. I became accustomed to the word“no”. I managed to solicit a cadre of variations theme to the extent I began to expect and anticipate the response. I learned to take a “no” and solicit another. As my skin thickened and the manure piled higher, I was able to garner a “maybe” here and there and occasionally a yes! It was the “ying and the yang” thing, “Yes means No” to the extent a Tibetan monk would have been proud.

Later, as a regional director at NCR Corp. at the sage age of 28 years, where I managed more than 70 neophyte sales reps in 10 states, I became well known for the expression, “lose more orders”. My mantra was the more orders you lose, the more opportunities you have to win. Spread that manure! Well not exactly...

Anyway, my dad fired me. he put me out of my misery! His too. He said I needed more experience. He was right. I was keeping him too busy spinning his wheels. At the time, I was devastated. I finished the blueberry pancakes my Mom had made me. I left town to seek employment near my fiancé, in Racine, WI. I stayed with the in-laws while looking for work.

I painted their house for $70 bucks, but I painted their windows shut, so we were even. I found a job right before I was evicted. But there's more to the story...

Monday, May 21, 2012

Social media platforms like Linked-In and Twitter are tools; but vital ones. Technology is getting better at making these tools easier to use. Many aspects are free.

I have found that most of my successful small business clients understand that core content of a base web is the preeminent feature of social media, but from there, effective networking is also a strong contributor.

You must network a core content and let it do the work for you, building connections around it like spokes on a wheel. Don't think only of Linked In, but expand your efforts to grow connections to other venues as well and use your core content to create synergism.

I set up a Google blog as an extension of my volunteer work that blossomed into a web site ($10 a year to buy and convert it from a blog to a domain in my name) containing the basics of entering and succeeding in the venue as well my books and articles on the subject for download via Box Net (also a free application)

The idea was to refer clients to article links at the site to avoid repeating myself over and over to new business clients and still keep myself available for specific inquiries and problems.

I linked everything together on "Linked In" and began answering questions at the "Answers" feature there as well as registering at many of the free applications for networking web sites on the Internet to see how that could benefit my work. Twitter, BlogCatalog, Facebook, Widgetbox, Friendfeed, Ning and similar free applications served my site well. The Adsense Feature added cash flow. Roughly 30% of my clients began coming via Linked In or Linked In related networking.

The result has been heavy traffic, good efficiency in supporting in excess of 5000 counseling cases and virtually no expense to me as a volunteer working for a non-profit organization.

Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in.

Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will have their ear.

When the dialogue begins to revolve around a specific scope of work that can be identified, quantified in terms of hours and a schedule, reduce these details to a quotation and ask the client to consider it.

Remember to quote and bill what the client can afford and grow with him.

Saturday, May 19, 2012

Many people find doing their own personal taxes very difficult, but with the various software products out there it is quite easy. Most of the questions on the forms are clear and easy to understand with automatic calculators keeping up with everything along the way you are finished in no time. Thinking that since there are software products for business taxes as well, the process should be the same…simple and quick. Even though this was our first year to file taxes we decided since the business made little income, we incorporated late into last year, there would not be much work to do.

First of all, make sure of the rules governing taxes within your state, such as do you need to file quarterly. You want to make sure you are doing what the state requires as well as the federal. Also, there are numerous free publications you should review outlining what you need to keep up with, such as start up expenses, and the various deductions you are allowed. You need to make sure you have set aside funds, regularly, to cover paying any taxes and do not wait until tax time to scramble for these funds. If you set aside more than what you need, well, you’ve earned a bonus or you may consider this fund to be, also, the fund to cover the recurring costs of doing business, such as yearly expenses for licenses and insurance. Consider setting aside these funds in a savings account for the company. This will help build your credit and with most banking institutions you can tie this savings account to your checking account for overage protection. Backing up your checking account is typically done with a credit card, but your business may not qualify for one for at least six months. Again, we are a very small business, just being my wife and me, so for small businesses with much more income and employees these ideas and ways of doing things may not apply or be on a scale to suit your needs. To better understand what all you will need, deductions and filling out tax forms I suggest reviewing an article found at this link http://www.brighthub.com/office/home/articles/12579.aspx which provides a good deal of basic information.

Even using small business tax software we did not find it easy to fill out the forms correctly and in some cases we had to guess. There is terminology used which is not defined, but I am sure is familiar to someone with an accounting back ground or education. Some of this terminology we could not find a clear definition of from on line sources as none of the definitions were applied directly to the use when doing your taxes. With that being said, I would suggest for your first year filing you use a tax service so you may sit down with them and have these various definitions provided and some guidance as to how they affect or apply to your specific type of business. It took the better part of a day for us to go through and fill out the forms which included a lot of head scratching, somewhat educated guessing and finger crossing.

All appeared to be good with what we submitted for federal and state taxes as no issues came back. I am not at all sure, in some cases, we did assign amounts to the correct areas (you can actually put amounts in different areas and still produce an “acceptable” filing) and that this will not come back to haunt us when we file again. I have every intention of using a service the next time so I may be better informed about the decisions we made this time and the potential repercussions if some of them were wrong. I do believe, though, once you understand all of the definitions you can do your own small business taxes about as easily as doing your personal taxes.

Thursday, May 17, 2012

Social media expands the potential "community" that is available for small and micro-businesses, but it also changes the way that they can interact with and engage their customers.

Social media is not only a tool for marketing, but it now gives businesses the ability to touch base with their customers on a personal level that they could never get without people physically coming to a store location (or office). Not only does this mean more sales, the potential to build more loyalty, and obviously make more money, but this also gives businesses the ability to develop or improve their products with feedback from the people most likely to spend money with them.. their existing customers! There is no better venue for businesses to develop and grow on this level. Add to that the fact that there is an incredible ability to track, understand, and utilize information that comes in via social media platforms, it can allow business to streamline their marketing and engagement strategies on a level no other form of advertising/marketing truly can. You never know how many people discover your business through newspaper ads or television spots. There's no question who comes to your doorstep via social media.

The sky is the limit with social media, and the ones who stand the most to gain from it are definitely small businesses.

I am not too sure if Twitter and Linkedin on their own can truly benefit a small independent company. However, Linkedin and Twitter only make up a small part of Social Media Sites - Facebook, MySpace, Bebo, Orkut,Tagged, Badoo etc.

The sites themselves are not the answer .... it is how small companies address the opportunities offered by the Social Media Platforms.

A small company CAN benefit from engaging in Social Media Marketing and can level the playing field and compete with much larger companies for the attention and ultimately their customer. For this they will need to know what their customers want and provide it in the form of valuable content. This way they can begin to build a relationship, become known as experts in the field, and contribute to a meaningful conversation. If they don't they will be defined by how their competitors define them, not how they would define themselves, if they had been part of the conversation.

When they are blogging and deeply involved in the conversation and adding to the conversation they will be seen as leaders and have people come to them for solutions to their problems.

Social Media is here to stay....Small companies need to harness the power of Social Media Marketing by providing opinions, solutions, advice, etc. The power of the blog is one of the channels that they can use. Others are videoblogs, webinars, participation in other conversations etc. This is how they will stand out.

Yes they need a level playing field and social media marketing can help provide a competitive edge. Besides, if they are not engaging with their marketplace, their competitors, surely will.

Monday, May 14, 2012

Many small businesses have used social media tools to go from unknown to worldwide recogitiion, top sales, and award-winning status. Yes, social media has revolutionized the way small business owners get noticed and compete with far larger companies.

Small businesses that don't use social media are going to get left behind, and ultimately, I believe, be out of business before long. It's a story of adapt and thrive, or remain the same and wither on the vine.

The biggest challenge for a small business is time.... so here's what I suggest:

- find out where your clients are in social media, and focus on that tool first: Really master it.

- Start small, experiment with social media, and see what works and what doesn't.

- Focus on that tool for one fiscal quarter and see what results you're getting.

- Evaluate, and repeat what worked for you.

Do market research and find out what your competitors are doing, evaluate what about their efforts appeals to you (along with what doesn't), and then do it better.

There's a lot of social media hype out there that doesn't make sense. Ignore that, and find out what works for your business.

Below is a link to a helpful checklist that outlines the essential four steps for small business owners using social media.

Saturday, May 12, 2012

Having a website is critical to most small businesses in this modern age. It allows for a wealth of advertising and the various links to social media where you continue to advertise your products or services. Other links include those to map locators, so everyone can find you, and on line phone books as well. All of these then in turn link to your website so it may serve its original purpose of product/service description, something about the company and some personal information about the owners (provide this only if it serves a purpose for the company services or products, not just to be there…remember, you’re selling, not socializing).

There are many services offering small businesses free websites…what this truly means is you can start it for free, but if you want it maintained you will have to pay or do the maintenance yourself. The maintenance I refer to is changing advertising, offering discounts, updating product or service descriptions or additions, changing layouts of pages with new or updated contact information etc. You will, also, pay for the service of having your website “SEO’d”…Search Engine Optimized, which means it will show up more often in online searches based on certain key words related to your services or products, your name, your address etc.

The company I paid to do the set up of my website acted so happy when it was, finally, completed they included this little acronym in their e-mail to me with the announcement the website was up and running and had been SEO’d! I was really happy they were happy and I was happy it was finally done, but I had no idea what “SEO’d” was, I had to look it up. This is another lesson for those of you who have small businesses and use electronic communication to be aware not everyone may understand your abbreviations…always spell it out first, then if you use it again, later, in the same correspondence you can abbreviate.

After going on line and reviewing what had been posted as my new website I did communicate back urging them to complete it and to provide all of the details they had promised…I was, also, tempted to just tell them “T.S.U.S.I” just to see if they could figure it out.

As you may have noticed, I used the word “finally” a couple of times. Obviously, there was some history here concerning how long it took, based on their promises, to get the site up and running. From the time I first contacted them to the time I told them to get started some 4 months transpired. I wanted to wait until I had passed certain required testing and obtained my license before I “launched” the company. I contacted them early to find out how long it would take to create the site. There first response was “a couple of days.” Later, when I contacted them and said I was ready, it was “a couple of weeks.” Shortly thereafter, as we were communicating back and forth on design issues and content, I was told I should be glad as they were putting me first as usually it takes two months to complete a site. The long story short was it ended up taking two months.

Again, this was something I did to myself…we could have been working on the site and when I was ready I could have told them to launch it. Not that I waited until we started to provide all the information they would need and all the pictures as well. I downloaded a document template from Microsoft Publisher and, essentially, created all of the pages for the website, including photos during the 4 month interim between my initial contact and when I said “go.” They expressed how much of a help this was, and how it would shorten the time to create the site. They used the layout of my pages; they used the graphics, the photos and most of the text. They basically copied and pasted most of the site content from the document I had provided. The majority of the time delays were due to long periods, days, whereas I could get no response from the design team.

I, also, did not anticipate the repeated threats I would have to make to get the site up to my expectations, which were based on their promises. I had been given examples of sites to view and promises of how good the site would look, how easy it would be for potential customers to use and for goodness sake I really thought they would be professional enough to use spell check! But, no, I get the e-mail the site was up and running (without having me review it) and it had been SEO’d! Well, now you understand why I wanted to just tell them “This Sucks, Un-Suck It” (aren’t you glad I, finally, told you what that meant).

Next time: “It’s just a small business, how difficult can it be to do the taxes yourself”

Thursday, May 10, 2012

Long term strategies are key, as well as agility in changing times, markets and economies.

I often recommend the article, "Are you Prepared to Succeed in Business" by Douglas H. Rogers, Jr., Winfield Akeley, Robert Edelson Content at the Biz Info Library.

Here is an extract:

"In today's competitive market, small businesses must deal with new competitors, ever changing markets, price sensitivity, and cash flow issues — flying by the seat of your pants just doesn't work anymore. Do you desire to lead your business to growth and expansion?

Rapidly changing technologies, instantaneous worldwide communications, and strong customer preferences require rethinking of how we manage a business. Technologies that lead to product life cycles of 18 to 36 months, and the necessity to focus on true customer desires affect most businesses either directly or indirectly. In order to meet dynamic changes in business conditions and customer needs, an organization must be agile and responsive to these changes.

The long-term success of a business is dependent on its long-term strategies. It has been said that a company can overcome inefficient use of internal resources if its basic strategy is brilliant, but not likely to get by with the wrong strategies even with excellent production and distribution capabilities.

Past success formulas might not work in the future. Therefore, a company must periodically reexamine its situation as objectively as possible and determine the best course of action for the future in order to meet its goals and objectives."

The article provides further details and case studies in strategic vision and planning by successful firms. It can be downloaded at no charge from the second, vertical, Box Net "References" cube at the link below.

Monday, May 7, 2012

As social media grows the numbers of bad customer service stories will grow proportionally faster than those about good customer service because they can be spread faster and wider with social media. One way to counteract that would be to have customer testimonials on your site and provide such great service that others agree publicly with the testimonials. I would even suggest that the company ask if others had the same experience.

Companies that are involved in social media have a tremendous opportunity to use the customer feedback to improve their offerings and their bottom line. Those that are new to the idea seem to be more concerned about increasing the number of "fans" on their site rather than asking for any real feedback. As a result, most companies don't consider the impact of social media until they have a bad "report card" floating around.

social media and social CRM can be used to gain customers, support existing ones and innovate based on their Feedback.

There are many ways businesses can use new social platforms and channels. Many people think it's just a case of setting up profiles and see what happens, it isn't.

'Social CRM' is a term I guarantee people will start to hear more and more. Social CRM is an extension of traditional CRM, but the social business model gives the customer more control.

Social networks allow businesses to build communities, listen and engage in conversions whilst having the ability to innovate based on prospects' and customers' insight. Businesses can themselves provide industry-specific insight and support to prospects and customers, then start to build and strengthen relationships. We all buy from people we like and trust, social media can be a great way to really turn contacts into long term customers. These platforms give the customer new ways to communicate with you and can provide you with a new way of understanding your customer-base. The more you know about someone the easier it is to sell to them, social media allows businesses to get on a level with their customers and understand more about them, which can only be a good thing!

I was told that when providing a service or product for someone, if they were pleased they might tell one other person. However, if they were displeased, statistically, they would tell 12 people about your poor quality service or product. With today’s technology and, literally, the world potentially the audience of those with computers or mobile devices I wonder…

1. What are the current numbers with respect to how many people may hear about the good or bad service or products?

2. Has the presence of social media affected your commitment to attempt to ensure that you are providing top quality in your product or service?

3. Do you, as a consumer, feel that there is evidence of a positive influence caused by social media on the quality of products or services in the market-place?... and ...

4. Should more business people pay more attention to how quickly a good, or bad, “report card” can be disseminated so quickly to so many?

Previously, unless your business was on a national or international scale, certainly the audience for your success or failure with regards to the quality of your product or service was much smaller. How has social media affected how YOU do business?

A good job comes with great health benefits...

Imagine that you've just accumulated enough sales/revenue to justify your first hire.... A good job comes with great health benefits, right?

Not so fast... that's not the case anymore. Today, nearly 60% of small businesses do not offer health insurance due to:

Cost

Firm Size

Employee Turnover

That's more than 3,000,000 U.S. small businesses that do not offer health benefits today.

Even so, a health benefits package can be the deciding factor for a potential new hire.

About 45 percent of “microbusiness” owners who responded to a survey by the National Association for the Self-Employed agreed it is necessary to offer a health insurance benefit to find and hire qualified people. More than 80 percent maintained small businesses don’t have access to the same health insurance options as large companies.

So, you're faced with a tough decision: To offer health benefits or not to offer health benefits?
To answer this question, you have to understand why most employees value health benefits over salary.

The history of employers providing workers with health insurance goes back for decades. In the early 1940s, the federal government changed the tax laws to allow businesses to provide health insurance coverage as part of an employee's compensation package 100% tax-free.
The primary reason companies offer health insurance today is because:

It is tax deductible to the business

Employees get the benefit 100% tax-free

As a result of this enormous tax advantage, $1 in health benefits may be worth $1.50 - $2.00 in pay to an employee depending on his or her family's tax bracket.

Additionally, the $1 in health benefits costs the company less than $1 in pay. (Remember, it's tax deductible to the business so the company does not have to pay payroll taxes!)

The first mistake many startups make is assuming that they can not afford to offer health benefits due to costs.

Here's a fresh perspective: if you can afford to hire an employee, you can afford to offer health benefits.

The real question is how do I structure the compensation and health benefits package for maximum value to the employee and minimal cost to the company?

It's not a question of whether to offer health benefits - It's a question of how to offer them

Depending on a number of factors (e.g. your age, your health and your prior experience with health insurance), you may have pre-conceptions of a small business's health insurance options.

For example, many startup owners incorrectly believe traditional group health insurance is the only way to offer employees proper health benefits. Consequently, many startups rule out employee health benefits altogether due to the costs associated with traditional benefit programs.

Don't take my word for it. The NASE survey (reference above) found that 46 percent of small business owners say they don’t have access to health-insurance options that fit their startup company’s needs.
Thanks to health care reform, startups and small businesses now have a new option : Defined Contribution Health Benefits.

How Every Startup Can Offer Health Benefits: Defined Contribution

With a defined contribution health plan, the company gives each employee a fixed dollar amount (a "defined contribution") the employees choose how to spend. Employees then use their defined contribution to reimburse themselves for out-of-pocket health insurance costs or other medical expenses 100% tax-free.
The reimbursements are:

Tax deductible to the business

100% tax-free to employees

As a result, $1 in defined contribution health benefits may be worth $1.50 - $2.00 in pay depending on the employee's tax bracket.

Additionally, the $1 in defined contribution health benefits costs the company less than $1 in pay.

(Remember, it's tax deductible to the business so the company does not have to pay payroll taxes!)

As a result, startups can integrate a customized health benefit into a compensation package for any new hire.
Here's how it works:

The business sets the defined contribution amounts (the amounts can be varied based on employee job classifications, and there is no "minimum contribution")

The business decides what expenses can be reimbursed by the plan (eligible expenses include health insurance premiums, dental expenses, doctor visits, etc.)

The business decides who is eligible for the plan (the employer can restrict eligibility based on job classifications, and there is no "minimum participation")

Why don't more startups and small businesses offer defined contribution health benefits? I think it's because they don't know the option exists. What do you think?